Pfizer may value Strides unit at Rs 10k cr

Feb 12, 2013, 07.04AM ISTTNN[ Reeba Zachariah & Mini Joseph Tejaswi ]

MUMBAI/BANGALORE: Big Pharma Pfizer Inc could value the sterile injectables unit of drug maker Strides Arcolab at up to $1.88 billion, or roughly Rs 10,124 crore, for a potential acquisition, said people familiar with the matter.

Pfizer's discussions with Strides Arcolab to acquire the latter's unit, Agila Specialties , is at a fairly advanced stage. The deal under negotiations values Agila at nearly 8 times of its 2012 revenue , estimated at roughly Rs 1,330 crore. This is slightly lesser than 8.7 times Abbott Laboratories paid to acquire the generic formulations business of Piramal Healthcare three years ago.

Bloomberg reported last month that Pfizer along with rivals Mylan Inc and Novartis AG are bidding for Agila, which has the most number of regulatory approvals for generic injectables in the US market in recent years. Strides Arcolab has been working with investment bank Jefferies & Co to explore a sale of the unit for a while, and so is in talks with Pfizer and others. The structuring of the deal and the actual payout could not be ascertained. Spokespersons for Pfizer and Strides Arcolab declined to comment on market speculation.

The valuation of Agila is significantly richer compared to other recent sterile injectable deals globally. But a huge medicine shortage in the US market - steriles account for more than 80% of the drug shortages there - and lack of enough FDA-complaint manufacturing plants are seen as reasons for Agila's attractive valuation. Agila accounted for 40% of Strides Arcolab revenue and 52% of its profits in 2011.

Last week, Strides Arcolab shares were hammered tracking rumours that Agila sale was called off. On Monday , the stock was up more than 1% at Rs 965 in a tepid Mumbai market.

For sure, the deal making has had roadblocks with the rich valuation sought by the two Strides Arcolab promoters being the main concerns. They had earlier rebuffed a smaller offer from Pfizer and Mylan, said a source cited earlier , but discussions resumed and were on track though not clinched, he added. Strides Arcolab Group CEO Arun Kumar , a tough talking first generation entrepreneur, has an M&A track record and had sold the Australian generic pharma business to Watson for $394 million.

An analyst with a leading brokerage said that there is a short supply of specialty injectables in the US and a possible deal in Agila will help Pfizer to secure supplies as well as cut costs by strengthening its back-end infrastructure . The analyst added that since the drug major is not into contract manufacturing , it would most likely ensure that Agila caters to inhouse requirements.

Looking for booster shot

The deal under negotiation values Agila Specialties at nearly 8 times its 2012 revenue, estimated at roughly 1,330cr aThis is slightly lesser than 8.7 times Abbott paid to acquire the generic formulations business of Piramal Healthcare 3 years ago aBut the valuation of Agila is significantly richer compared to other recent sterile injectable deals globally.